Question

A stock sold for $25 at the beginning of the year. The end of year stock...

A stock sold for $25 at the beginning of the year. The end of year stock price was $25.70. What is the amount of the annual dividend if the total return for the year was 7.7 percent?

$1.23

$1.38

$1.60

$1.81

$2.31

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Homework Answers

Answer #1

The correct answer is $1.23
Return from Stock = (Dividend distribution + Change in stock price) / Beginning stock price

Change in stock price = Ending stock price - Beginning stock price
= $25.70 - $25
= $0.70

Return from Stock = 7.7% or 0.077

Beginning stock price = $25

Return from Stock = [(Dividend distribution + Change in stock price) / Beginning stock price] * 100

0.077 = (Dividend distribution + 0.70) / 25

0.077 * 25 = Dividend distribution + 0.70

1.925 = Dividend distribution + 0.70

Dividend distribution = 1.925 - 0.70

= 1.225

Rounding to two decimal places

= 1.23

Annual dividend = $1.23

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